Reference no: EM131116124

Question 1: Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income.

Problem Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for $0.50 per 16-ounce bottle to retailers, who charge customers $0.75 per bottle. For the year 2014, management estimates the following revenues and costs:

Instructions:

(a) Prepare a CVP income statement for 2014 based on management's estimates.

(b) Compute the break-even point in (1) units and (2) dollars.

(c) Compute the contribution margin ratio and the margin of safety ratio.

(d) Determine the sales dollars required to earn a net income of 18000

Net sales				$1,800,000	Selling expenses - Variable			$70,000
Direct materials				430,000	Selling expenses - Fixed			65,000
Direct labor				360,000	Administrative expenses - Variable			20,000
Manufacturing overhead - Variable				380,000	Administrative expenses - Fixed			60,000
Manufacturing overhead - Fixed				280,000

Question 2: - Prepare absorption and variable costing income statements and reconcile differences between absorption and variable costing income statements when sales level and production level change. Discuss relative usefulness of absorption costing versus variable costing.

Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel

Problem - Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications.

During the coming year it expects to sell 60,000 units for $30.00 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule.

Division Information for 2014
Beginning inventory					0
Expected sales in units					60,000
Selling price per unit					$30.00
Variable manufacturing costs per unit					$12.00
Fixed manufacturing overhead costs (total)					$540,000
Fixed manufacturing overhead costs per unit:
Based on 60,000 units ($540,000 ÷ 60,000 units)					$9.00
Based on 90,000 units ($540,000 ÷ 90,000 units)					$6.00
Manufacturing cost per unit:
Based on 60,000 units ($12.00 variable + $9.00 fixed)					$21.00
Based on 90,000 units ($12.00 variable + $6.00 fixed)					$18.00
Variable selling and administrative expenses					$2.00
Fixed selling and administrative expenses (total)					$50,000

Instructions:

(a) Prepare an absorption costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.

(b) Prepare a variable costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.

(c) Reconcile the difference in net incomes under the two approaches and explain what accounts for this difference.

(d) Discuss the relative usefulness of the variable costing income statements versus the absorption costing income statements for decision making and for evaluating the manager's performance.

Attachment:- Managerial Accounting.xlsx